There is no use denying the fact that the environment plays a very significant role in the life of people and the functioning of different organizations. It determines the way in which a company can develop and what dangers can await it in the future. That is why it is vital to analyze the existing environment in order to predict some possible complications and be able to respond to them.
There are several analysis frameworks that help to investigate the existing environment, however, special attention should be given to PESTEL framework as it seems to be the most useful one. It analyses the ways in which political, economic, social, technological, ecological, and legal environments might affect organizations (Johnson, Whittington, Scholes, Angwin & Regner 2013). Resting on the title of this framework, it is possible to say that it provides a wide range of possibilities to predict and identify threats and find out opportunities. The given framework deals with a great number of different factors that are peculiar to different spheres of activities. Moreover, very often, these factors are interrelated, and analyzing them, it is possible to touch very important issues.
From this framework, it becomes obvious that the environment is not just about economics, though there is a great number of other factors that influence a company. That is why the ability to take into account a combination of reasons and conditions, which influence a company at the moment, is the main advantage of PESTEL framework. Because of its orientation in different fields of activity, it is possible to predict what kind of complications can appear. However, there also some ways to improve the existing framework. Some new fields, which obtain more and more important nowadays, should be added to the analysis.
There are also several important concepts connected with the issue of external analysis. Nowadays, managers are recommended to use this kind or tool instead of traditional SWOT analysis (Grundy 2006). One of the main important concepts connected with this field is the issue of five competitive forces, which is rather important nowadays. The analysis of these forces can help a company to formulate its strategy and investigate its strategic capability.
It should be said that the same PESTEL framework can be used for external analysis. One of the main strengths of this remedy is the possibility to analyze a great number of different factors and their combined influence on a company. Moreover, another advantage is the possibility to analyze opportunities and threats which surround a company. However, there are also some limitations connected with the inability of this framework to analyze all existing factors.
Though, even under these conditions, this framework can be used in order to analyze the external environment and apply the data obtained to improve the functioning of a company. Information can show the strong and weak sides of a company, and it can create a strategy to get rid of drawbacks.
Finally, this sort of analysis has a great influence on the production and services which a company provides. The fact is that any company organizes its functioning in accordance with the existing demands and, that is why all these factors influence the manufacturing of certain goods and the way of their distribution.
Reference List
Grundy, T 2006, ‘Rethinking and reinventing Michael Porter’s five forces model‘, Strategic Change, vol. 15, pp. 213-229. Web.
Johnson, G, Whittington, R, Scholes, K, Angwin, D, & Regner, P 2013, Exploring Strategy Text & Cases, Pearson, London. Web.